Good morning! The market took that late day weakness on Wednesday afternoon and really ran with it yesterday. Without any strong volume at the prior afternoon's 13:50 ET pivot lows, the indices were not able to put in an exhaustion move. The correction into 15:00 ET, which occurred at a slower pace, was able to continue to break lower on Thursday morning, confirming the change in the intraday pace which we had been looking for.

This continuation to the late day breakdown lasted until the 10:45 ET reversal period on Thursday. At that point the volume spiked to indicate exhaustion intraday at about the same time that the market had put in an equal move decline as compared to the drop off Wednesday morning highs into the 13:50 ET lows.

Even though we did see exhaustion this time around due to this increase in volume, two waves of intraday selling can easily be followed by a third. Over noon, the market fell into a narrowing range. Around 13:00 ET the range began to favor its lower end, basing along the 5 minute 20 sma as it moved into the 15 minute 20 sma zone. It triggered that third wave of selling shortly after the 13:00 ET reversal period and fell quickly on the 5 minute charts.

I was expecting another equal move on the larger time frames, but this time around it took a bit longer to hit that level. With the sharp decline into the early afternoon also came another volume spike. A slightly lower low on the 1-2 minute NASDAQ set up a scalp buy setup and the market corrected into the 5 minute 20 sma resistance. The moving average was able to hold due to a number of factors. For one, it was a more gradual upside pace on lighter volume with the 14:00 ET reversal period looming. There was also that pesky larger time frame equal move that remained as a magnet. This aided in a resumption of the selling and the market continued to hold the 5 minute 20 sma resistance going into the close.

Action such as this, which we saw to some degree on 9/14 and 10/4, has a very difficult time reversing strongly the next day because it takes place coming out of daily resistance following more than a week of upside. Granted, it was choppy upside in the SP500 and Dow Jones Ind. Ave., but it was nevertheless a correction from lows made a few weeks ago. Since we have had three waves of selling on the larger 15-60 minute charts, however, there is a higher chance for a more choppy day to follow. Since it is also a Friday, I am going into the day with a more scalpish bias on intraday setups.

Economic Reports and Events
Oct. 28: Chain Deflator-Adv for Q3 (8:30 am), Employment Cost Index for Q3 (8:30 am), GDP-Adv for Q3 (8:30 am), Mich. Sentiment-Rev for Oct. (9:45 am)
Oct. 31: Personal Income for Sep (8:30 am), Personal Spending for Sep (8:30 am), Chicago PMI for Oct. (10:00 am)
Nov. 01: Construction Spending for Sep (10:00 am), ISM Index for Oct. (10:00 am), Auto Sales for Oct. (12:00 am), Truck Sales for Oct. (12:00 am), FOMC policy announcement (2:15 pm)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stocks' earnings dates before holding a position overnight. (A) = Earnings after the close, (B) = Earnings before the open, (?) = Earnings time not specified at the time of this writing
Oct. 28: ABB (?), AFR (?), APC (B), ADM (B), AVP (?), BHI (B), BC (B), CHKP (B), CVX (?), CEG (?), COCO (?), NOV (B), PEG (08:45 am ET)
Oct. 31: CHK (A), CTSH (B), GGP (A), HMY (?), HUM (5:00 am ET), NDE (B), K (B), MVSN (A), NLC (A), NR (?), OXY (?), OIS (A), REG (A), SYY (?), PFG 8A), VLO (?), GRA (?), XL (A)
Nov. 01: LEND (B), AIV (?), AXS (A), ITU (?), BJS (B), CCJ (?), CEPH (A), CHTR (B), CMS (B), CL (B), CNCT (?), CEI (B), EDS (A), EMR (?), ETR (?), EOP (B), EQR (B), EXPD (B), FTI (A), FPL (B), HNT (B), INCY (B), KFRC (A), MBI (?), MHS (B), PNRA (A), PKD (?), PFGC (?), PLT (A), PRTL (A), PLD (B), PDLI (A), Q (B), RRI (B), RDC (?), SUNW (?), SYMC (?), TXU (B), URI (B), UNM (A), VCLK (4:05 pm ET), VNO (B), ZBRA (?)

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.